In 1812, Britain and America went to war over Canada. Today, Canada is beating them both

By returning to the basics of good government, Canada is outpacing Britain and the US

Two hundred years ago, on June 18, 1812, the United States declared war on Great Britain. No one had right on their side; the outcome was a draw. America wanted a bit of Canada and to stop the British from kidnapping its sailors. The nasty old Brits were also arming the Native Americans, whose land the Americans wanted to steal. Had the British won the War of 1812, they might have helped create a viable Native American nation dominating the Great Lakes region. Alas, it wasn’t to be. The Americans scored successes in 1813, seizing parts of Western Ontario and destroying the Native American dream. The Brits fought back in 1814 and razed Washington DC to the ground. The Americans repulsed British invasions of New York, Baltimore and New Orleans, and a peace was signed on December 24, 1814. During the course of the war, thousands of American slaves escaped to freedom in Canada. Perhaps that was the great paradox of 1812: a slave holding republic took arms against a monarchy committed to emancipation.

The Americans have a habit of only remembering the good things about their history, so they recall the conflict mostly for the fact that it gave them their national anthem. The British remember nothing of their history, so it doesn’t even enter the popular consciousness. For Canada, however, 1812 created a myth of self-reliance and national destiny. Two hundred years later and they are realizing both by economically outpacing the former great powers. How?

Until the 1990s, Canada was building up a massive European-style welfare state. In 1993 the deficit was worth 6.6 percent of GDP and by 1994 debt had hit 101 percent. The economy was growing; the problem was that the generous welfare provision that Canadians regarded as part of their DNA was sapping their wealth. In response, finance minister Paul Martin decided to return the Canadian economy to the old fundamentals of the liberal state – encourage growth, keep finances under control, provide a basic safety net. Between 1994 and 1996 he cut spending by C$14 billion – 15 percent, across the board. Growth slowed and Canadians saw sacrosanct programs reduced to emergency relief. It was one of the boldest experiments in retrenchment ever tried.

Of course, Canada has also had the good fortune to find itself sitting on a lot of oil. As such it has ridden an export boom that would be hard for others to replicate (although the US does itself no favours by its present energy policy). It has also been helped by robust consumerism south of the border. By devaluing and making its cuts in the good times, Canada set itself up well to survive the bad.

Therefore, it is tempting to dismiss Canada’ success as good luck. But the UK has had similar opportunities and it blew every one of them. Britain didn’t devalue quickly enough in the 1960s. In the 1970s, she discovered oil and wasted its revenues. In the boom years of 1995-2008, she spent her income rashly rather than investing it. Moreover, Britain has embraced austerity with all the timidity of a hypochondriac hugging a leper. Public spending rose in 2010-2011, and fell by just 1.5 percent last year. Government spending is now £22 billion higher than it was in 2008. Compare that to the headline figure of a 15 percent cut in Canadian spending in the mid-1990s. In short, Canada managed her good luck better than the British did.

And so we celebrate the 200th anniversary of the 1812 war in highly ironic circumstances. The British Empire is long gone; American power is dwindling. Both nations are mired in debt and increasingly owned by China, a country that was owned wholesale by the West. Meanwhile, plucky little Canada – little more than a fur trapper outpost in 1812 – is the nation on the up-and-up. “O Canada … With glowing hearts we see thee rise.” And with green eyes, too.